Mozambique’s public debt worsened in 2021, but the government argues that it has become more sustainable, according to a report published by the Ministry of Economy and Finance consulted today by Lusa.
“This report found the persistence of a significant growth trend in both the ‘stock’ of debt of the central government and the debt of the state business sector,” the document reads.
The government’s debt rose by 8% to around US$14 billion (13 billion euros), while that of the state-owned enterprise sector grew by 30% to around US$4 billion (four billion euros).
The sum of the two portions shows that “the ‘stock’ of public sector debt in 2021 grew to $18 billion (17 billion euros), corresponding to 102% of GDP,” the report summarizes.
Mozambique thus remains “under the classification of over-indebtedness.
But the executive argues that “despite the increase in the nominal stock, preliminary analyses suggest that the performance of the public debt sustainability framework (of the central government, one of the tranches) has evolved favorably.
An evolution justified by the growth of the Gross Domestic Product (GDP, up 2.16% in 2021) and by the increase in exports, factors that were highlighted, although “in a magnitude yet to be quantified”.
There was also the deferral of spending of $176 million (166 million euros) thanks to the G20 Debt Service Suspension Initiative (DSSI) to cushion impacts of the covid-19 pandemic by improving liquidity ratios.
The increase in public debt in the portion that concerns the central government covered the deficit in the State Budget, the report explains, in the context of fiscal pressures caused by covid-19, armed violence in the north, and natural disasters (cyclones in the north and center and drought in the south).
As for the other part, the state business sector, the report states that the increase in debt relates mainly to the financing of the state co-payment (disbursements to the National Hydrocarbons Company, ENH) in gas projects, so that “the trajectory of the country’s debt can, in the long term, be considered sustainable.
The doubt, to which no one has an answer yet, lies in knowing how long the term will be, since the insurgency in Cabo Delgado, in northern Mozambique, forced the suspension of the gas megaprojects and it is not yet known when they will be resumed.
Regarding the origin of the public debt (internal or external), there was a growth of 26% in internal debt “in a context of low level of disbursements and contracting of external loans” which rose 3%, justified mainly by data reconciliation operations with creditors.
The relationship with the outside may grow in 2021 after the signal given with the International Monetary Fund (IMF), which will resume financial aid to Mozambique this year through a specific program, a modality suspended since the outbreak of the hidden debts scandal in 2016.
The Debt Report published by the Mozambican government includes for the first time an analysis of the performance of Public-Private Partnerships (PPPs), assessing 19 contracts with “a level of contingent risk between ‘low’ and ‘low-medium’, therefore concluding that these PPPs do not represent a significant fiscal risk.”
“Nevertheless, the persistent volatility of the economic environment and business environment points to the need to deepen the measures for monitoring and mitigating contingent liabilities in order to reduce the impacts of possible adverse shocks on the stability of the economy,” it concludes.
